Eutility's weekly news

Second bidder enters race to buy Liddell coal-fired power station

Second bidder enters race to buy Liddell coal-fired power station

A new contender has emerged in the fight to extend the life of an ageing coal-fired power station, with Delta Electricity willing to enter a contest
against Alinta Energy to buy the Liddell plant.

The development puts two potential bidders in the negotiations over the Liddell power station, a key component of the east coast electricity grid with
enough capacity to power one million homes.

Delta managing director Greg Everett told Fairfax Media the company would be in the running to buy the Liddell station from AGL but had been shut out
from doing any due diligence on a deal in the past.

“Would we be interested? If it was for sale we would definitely be interested in doing due diligence on it,” Mr Everett said.

“So we’d be in the same position as Alinta.”

Alinta chief executive Jeff Dimery confirmed on Wednesday morning that his company was interested in Liddell, and was not seeking any government subsidies
to close a deal. He said Alinta was willing to invest around $1 billion to acquire and upgrade the plant to extend its life by five to seven years,
pushing its closure date to between 2027 and 2029.

The government fears AGL's plan to withdraw Liddell's four turbines - with a total capacity of 1680 megawatts - risks power shortages and a repeat
of the spike in power bills experienced following the sudden closure of the Hazelwood power station in Victoria early last year.

Labor has accused the Turnbull government of giving “false hope” to workers and customers about extending the life of Liddell, given AGL chief executive
Andy Vesey has vowed to close the power station by 2022.

Delta expressed interest in the power station late last year but did not engage in any due diligence because AGL insisted the asset was not for sale.

While AGL offered a tour of the facility to journalists last September, it has not offered any access for potential bidders.

Mr Everett, who is familiar with Liddell from his time as chief executive of Delta when it was owned by the NSW government, has previously said there
was a “reasonable” chance of extending the life of the power station beyond 2022.

“People can see that there’s room for a productive asset as long as it’s productive,” he said.

“The first thing you’d want to check is the safety issues. You’d also be wanting to make sure that the structural aspects of the plant are still sound.”

Delta, a private company, operates the Vales Point coal-fired generator in the same region of NSW as Liddell.

A key concern is the way the Liddell shares access to water and coal with the neighbouring Bayswater power plant, also owned by AGL.

Critics of Mr Vesey claim his plan to shut Liddell aims to use the subsequent shortage of reliable baseload power to boost the price AGL gets for the
coal-fired electricity from Bayswater, boosting the company’s profits.

Mr Everett said due diligence could only start if AGL agreed to consider bids.

“That’s the trigger. They have to say it’s for sale and, if it is, they have to facilitate the sale through due diligence and shared arrangements,”
he said.

AGL issued a cautious response to the new interest in its asset from Alinta.

"AGL is relying on Liddell to generate power for our customers until 2022 and we will require its infrastructure for our replacement plans into the
future," an AGL spokesman told Fairfax Media.

"AGL received an approach from Alinta last night expressing an interest in entering negotiations to acquire the Liddell Power Station. No formal offer
has been received.

"Should a formal offer for Liddell be received, it would be given consideration in order to meet our obligations to customers and shareholders."

Mr Turnbull ramped up the pressure on AGL on Wednesday morning, saying it was in the public interest for Liddell to stay online.

"AGL should do the right thing by their customers, by the community, and I think by their own shareholders, and either keep this plant going for another
four or five years or sell it to somebody who is prepared to do so. It's manifestly in the public's interest that that happens," Mr Turnbull said.

"I really welcome the offer from Alinta - that's a very credible energy company. I know
there's another Australian company that's expressed interest, Delta."

He said there was no request or need for government subsidies to facilitate the extension of the plant's operational life.

Western Sydney Liberal MP Craig Kelly backed the proposed sale to Alinta and said there was no need for government subsidies to incentivise it.

"I don't think there's any need for subsidies. I believe, firstly, that AGL have to agree to sell it," Mr Kelly said, warning of the impact on energy
supply and prices if the plant closes.

He also dismissed the suggestion that Liddell continuing beyond 2022 would eliminate the need for a new station to be built.

"Liddell will still have to be replaced. Keeping it open is only going to be a patchwork job – any upgrade will mean it will last another five or ten
years. It needs to be replaced entirely in the long term. But in the meantime, the current wholesale energy price is still unacceptably high and
that's why we need additional baseload generation to get that price down."

Liberal senator Eric Abetz said the push for AGL to seel was "absolutely the right move" and expressed a hope it would succeed.

Asked if it would mean a government-funded station was no longer necessary, he said "hopefully" but maintained that all options needed to be on the
table.

Energy Minister Josh Frydenberg ruled out the possibility of financial support or incentives to encourage the sale.

“We are not looking to provide financial assistance to Alinta but rather create the environment where the parties can have a constructive discussion
about the sale of Liddell,” Mr Frydenberg told Fairfax Media.

Alinta is likely to put forward an official offer at the end of April and wants to take control by September.

If a sale were to occur, it would not be the first joint coal-fired power station partnership between Alinta and AGL.

AGL owns the Loy Yang A power station in Victoria while Alinta owns the neighbouring Loy Yang B power station. Alinta sources coal through AGL and
Loy Yang A. If Alinta were to take control of Liddell, AGL’s continuing ownership of the nearby Bayswater power station would likely create a similar
coal-sourcing agreement.

However, it is understood that it would be extremely difficult to separate the Bayswater and Liddell plants and run them as independent operations.

The Alinta chief also slapped down the push by conservatives within the Coalition to have billions of dollars of taxpayer funds ploughed into new coal-fired
power stations to compete with growing renewable energy generators.

Asked if he thought the government should once again become involved as a direct energy player, he said: "The short answer is no I don't believe that
they should be."